How To Make The Most of Your Tax Refund

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Tax Refund

How To Make The Most of Your Tax Refund

Every year, millions of Americans receive billions of dollars back in the form of tax refund. An income tax return provides you a great opportunity to enhance your financial situation. So, before you get carried away and use the refund amount for shopping, vacation, dining out and for other fun activities, here are some ways to use your refund to your financial gain:

Enhance And Expand Your Emergency Fund

Financial emergencies can happen at any time, without any prior notification. Month after month, you may have to deal with some unexpected expense that can be medical bill, utility bills, house rental, due, sudden car repair charges and more. This is the reason why it becomes very important to create an emergency fund. If you don’t have one currently, start creating it and if you already have one then increase your contributions towards for emergency fund. Having lack of savings will leave you helpless sin case of emergency and may force to take up high interest payday loans. So, make a wise decision to create or increase your emergency savings if you want to live peacefully.

E-Transfer Money Directly To Your Savings Account

The IRS allows you to split up your refunds into three accounts through direct deposit. This is the perfect opportunity to boost your savings directly into your savings account, assuring that the money stays out of sight and out of mind until you really need it.

Pay off Credit Card Debt

If you are carrying the credit card balance, consider using the income tax refund amount to pay off your credit card debt. It doesn’t make sense to put refund check for $3,000 in a fund yielding 1% interest and maintain a $3,000 balance on your credit card charging interest at 18%. By following this route you will be able to put more money in your bank every month once those minimum payments disappear from your list of bills.

Increase Your Retirement Saving Contributions

Planning and saving for retirement is a great option to have a better future with no stress about finances. The early you start saving for your retirement, the more you can save for your old age. By securing a comfortable retirement fund before you reach retirement age, you can very conveniently remove the stress of late-career hiccups and sequence risk from stock market crash. So, without thinking much, increase your retirement saving contributions with the tax refund amount.

Consider Having a Kid

When you start your career you work really hard to save money, to diversify your investment and save for retirement. Other than that you can start to plan for a kind now. This can be a best approach to grow your family as your child is allowed to contribute up to $5,500 for an IRA as long as the child has that much earned income.

Use The Refund for Child’s Education

If you have children or grandchildren, you can consider saving your refund for child’s college education. Setting up a 529 plan can help them afford a higher education in an era where increasing costs leave many saddled with massive debt along with the diploma.

Invest In The Stock Market

Investing in stock market may be a risky choice but it also offers great return than savings account. Considering the long-term outlook in the stock market can be a better option if you don’t have an immediate financial need. Pick individual stocks or select an index fund that moves up and down along with the market.

Invest In Your Business

Saving tax refund can be a great tool to take your business to the next level. The refund can go towards investing more in a business or buying more stuff you may need to grow your business.

Start a Business

Starting your own business doesn’t mean you have to quit your current job. You can use the refunds amount to kick start a small business venture like selling good goods online, start baking a cake and selling them, design a website and also you can turn your hobby into a money-making enterprise.

Make Home Renovation

If you were waiting for home renovation work, then you can consider spending the refund amount for home improvement work like replacing old windows, repairing work, changing old appliances to new ones, remodeling your kitchen or bathroom and more.

Get An Insurance Coverage

If you don’t have one currently, consider getting a health and life insurance cover. The term policy can provide protection to you and your family at a relatively low cost. For the cost of a few hundred dollars, your tax refund can allow you and family to not stress about health expenses and also prepare your family financially for the unthinkable happening.

Prepay Your Mortgage

If you want to save money over the long term, making extra payments on your mortgage can be a great idea. You pay so much interest charges on your loan and by reducing the principle amount you can have an exponential effect over the life of the loan. An extra prepayment of your loan can make a big difference in your future obligation to the bank.

Save Money To Buy a Home

If you are planning to buy a home, start saving your refund to fulfill that dream. Putting your taxable return amount into savings to buy a home will make a big difference and keep pushing you towards making your dream come true.

Pay Down Your Car Koan

The sooner you pay off your car loan, the sooner you can get rid of those high interest charges. However, if you have a car loan close to 4% interest rate, invest the money elsewhere and leave the loan in place. The decision of paying down the car loan should depend on your interest rate, risk tolerance and investing confidence.

Book An International Holiday

Everybody loves to go on a holiday and after putting so much hard work for a year, you definitely deserve a break. So, this year you can plan to book an international holiday instead of saving and investing your refund amount. It is helpful to keep treating yourself from time to time as holiday refreshes you and makes you happy and relaxed. But don’t stop there. Find to find cheap holiday packages and make most of your refund amount. You can consider going for some affordable destinations and can look for some budget stay. This is another way to save money when you are on a holiday.

Ando Thijs works as a financial advisor in Canada the many things I love, sports, comic books and music are right on the top. I love indulging myself in those and I also love writing about them. Follow my website and check out my art:

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